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An investigation into the credibility of currency board arrangements in Bosnia and Herzegovina and Bulgaria

Selena Begović, Nick Adnett () and Geoff Pugh

Journal of Comparative Economics, 2016, vol. 44, issue 3, 787-799

Abstract: Currency Boards are usually argued to increase the credibility of the monetary authority, although this effect ultimately depends on the economic, political and institutional circumstances in the specific country. Few studies have previously been able to address this issue empirically. Using a novel database, the analysis conducted in this paper finds that, other things being equal, the credibility of the monetary authority is likely to be higher in those European transition countries with currency board arrangements, namely Bosnia and Herzegovina and Bulgaria. The results also suggest that currency board arrangements are more likely to increase the credibility of the monetary authority in countries with a low level of trust in government and a weak economy. These findings imply that the maintenance of currency board arrangements in recent years in Bosnia and Herzegovina and Bulgaria may have been advantageous.

Keywords: Currency board arrangement; Credibility; Trust in currency; Trust in government (search for similar items in EconPapers)
JEL-codes: E52 E58 E42 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:44:y:2016:i:3:p:787-799

DOI: 10.1016/j.jce.2015.07.003

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